Detroiters need jobs and Detroit needs taxpayers

A technician at Shinola assembles a watch. Shinola operates in Detroit and three-fourths of its employees live in the city. In the aftermath of the city's bankruptcy, Detroit will need more of its people in the workforce to provide the tax base to keep the city financially viable.

Credit Lester Graham / Michigan Radio

To successfully emerge from bankruptcy, Detroit has to find ways to cut spending and increase revenue. But that’s not going to be easy when so many Detroit residents are struggling just to get by.

No matter how well bankruptcy goes for Detroit, the city is going nowhere if most of its residents are broke and without jobs.

No jobs mean no income taxes for the city.

Income taxes amount to the largest category of taxes collected – close to four out of ten dollars collected – and Detroit needs those municipal income tax revenues to keep the streetlights on and the trash picked up.

That’s why companies coming to Detroit and hiring residents of Detroit is an exciting trend for Detroit boosters.

Credit Lester Graham / Michigan Radio

With a hair net on my head, a lab coat on, and little blue booties on my feet, I’ve been allowed on the assembly floor of a Detroit a company called Shinola.

It makes – among other things – watches. You don’t want any contaminants, like a hair from my head, messing up the fine timekeeping mechanisms that are being put together by about 225 technicians who work here.

Shinola is making its watches in Detroit as part of a statement. Watches from the gritty urban underdog sell pretty well in the upscale New York stores catering to hipsters or wannabe hipsters.

“Manufacturing is in the DNA of the people of this city, and we’re manufacturing watches here. Much like cars, car engines. You know, we have an assembly facility right here in Midtown Detroit,” Panis said.

He added if you like the city, want the city to succeed, you’ve got to make sure the people succeed.

“You know, it’s all from people right here in the city who are part of this inner-city community who are renting homes, buying homes,” Panis explained.

Three out of four people who work at Shinola live in Detroit.

They’re buying those houses and paying property taxes. They pay the city’s income tax. They contribute.

But Detroit is going to need a whole lot more resident taxpayers.

“My apprehension would be that after bankruptcy there still is too small a tax base to support the basic services that the city will need,” said Reynolds Farley.

He’s a professor at the University of Michigan. He says besides a lot of people abandoning Detroit in the last few decades, those who are left don’t have the kinds of jobs they used to have if they have a job at all.

"The wages of black men are about half in real terms now (compared to) what they were in 1970 and the poverty rate has gone up."

“One of the more discouraging things with regard to the black population is in 1970 the typical job was in vehicle manufacturing. Now the largest employer of African-Americans in the state of Michigan is the quick food restaurants,” Farley said.

That’s left those residents still living in Detroit with very little.

“And so, income of black families is down. The wages of black men are about half in real terms now (compared to) what they were in 1970 and the poverty rate has gone up,” Farley explained further.

Credit Lester Graham / Michigan Radio

There’s been a lot of news coverage of suburban corporate headquarters and thousands of jobs moving into Detroit. And it’s true, those corporate offices and jobs will help Detroit. Corporate income taxes help. And those people who live in the suburbs but work in the city will pay city income taxes.

But out-of-city residents pay half the income tax rate that residents do. And, according to a 2009 analysis, Detroit didn’t collect tens of millions of dollars that it was due from commuters from the suburbs and corporations.

The McKinsey Report also found Detroit loses out on some income tax revenues from residents who work outside the city. Employers outside Detroit are not required to withhold city taxes. It’ll take a new state law to fix that.

It used to be the city of Detroit’s employment agency, but because of the city’s financial struggles, it went off on its own in 2012. She says the city is only going to recover if prosperity is shared by Detroit workers getting jobs in the city.

We've got to stay focused on it because, again, we've got to increase property tax revenues; we’ve got to increase income tax revenues into the city. We’ve got to grow the city. We’ve got to address the crime. And when people are working, the crime is going to be reduced. And so, it’s all connected,” Moore said.

Jobs are scarce in the city. Of adult black men aged 25 to 59, you find only about 45% of them have jobs. So when a company comes to Detroit and makes a determined effort to hire people from Detroit, it matters.

A company called Detroit Manufacturing Systems which makes dashboards for Ford vehicles has hired hundreds of Detroit residents in the last couple of years. Whole Foods made a determined effort to hire Detroit residents.

Shinola also manufactures bicycles, leather goods, and will soon again produce a shoe polish. The Shinola company was originally a shoe polish company in the 20th century.

Credit Lester Graham / Michigan Radio

And Shinola keeps hiring.

Willie Hollie hired on at Shinola before anybody had heard of the company.

“Before it used to be that I said I worked for Shinola and they’d say, ‘What? Shinola? What’s that?’ But now, they’re like, ‘Hey, you work for Shinola, right? You think you give me an in?’ Because, you know, there are still people out here looking for jobs,” said Hollie.

And those people getting jobs, investing in their homes and neighborhoods, spending money at local stores, and, yes, paying their taxes is the only way Detroit will be a functioning city after bankruptcy.

Michigan Radio is teaming up with a handful of other media outlets to look at Detroit's bankruptcy and its aftermath. The Detroit Journalism Cooperative will spend the next year exploring Detroit's future and what it means for the state.

Support for the Detroit Journalism Cooperative on Michigan Radio comes from the John S. and James L. Knight Foundation, Renaissance Journalism's Michigan Reporting Initiative, and the Ford Foundation.

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What important questions are we, in the media, not asking about Detroit?

What impacts of the Detroit bankruptcy have flown under the radar? What about questions about life post-bankruptcy – like just how can Detroit rebuild its neighborhoods and create more high-paying jobs? And what does all of that mean for Michigan as a whole? Well, Michigan Radio is partnering with other media organizations in the state to try and find the answers to those questions. And so welcome to the new "Detroit Journalism Cooperative." Lester Graham will be digging into the coverage for Michigan Radio and he joined us today.

The city of Detroit actually has a person whose title is Director of Community Engagement. Yesterday, her job was to tell people to go out and clear ice and snow away from the drains on their streets to prevent flooding.

The city no longer has enough manpower to do this, she explained. They’ll be lucky if they can keep the drains open on the main streets. So the residents need to do it, and while they’re at it, clear the hydrants in case there is a fire.

Nothing wrong with that. I’ve done the same with both snow and leaves from the drain on my suburban street.

But it indicates in a small way one of the big problems Detroit is going to have after the bankruptcy is over.There is not enough money to provide basic services or to maintain basic infrastructure.

Bankruptcy isn’t really designed to fix that. It is designed to get rid of debt. We are still waiting for emergency manager Kevyn Orr’s plan to get there. He does talk about directing more money into basic services, such as police and fire and removing blight.

Detroit’s largest union – AFSCME Council 25 – and the city’s two pension funds – Detroit Police and Fire Retirement System and the General Retirement System – are among the creditors who filed an appeal to Judge Steven Rhodes’ December ruling that Detroit is eligible for bankruptcy.

According to the Freep’s Nathan Bomey and Matt Helms, Detroit’s bankruptcy case would continue as the appeal case works through the courts.

The central argument for the union and pension funds is that the city did not negotiate “in good faith” prior to filing for bankruptcy, meaning the city and state "rushed" to bankruptcy court.

Rhodes, in his ruling to approve Detroit's bankruptcy, determined that good faith negotiations were not possible under the circumstances.

Crime, education, unemployment, services – all have a direct bearing on urban life, and all are measurable in data, and trackable over time.

But what can be lumped into a category one might call “livability?” The factors that make a city appealing to ordinary residents, workers, families, young people and fun seekers aren’t so easy to quantify. As is typical in this city of extremes, residents enjoy rich bounties and suffer appalling deficits.